Ghana's pre-poll budget to aid poor, limit deficit

Ghana will raise spending by over 12 percent to tackle poverty in a 2012 election year but will keep finances in check with higher state revenues, President John Atta Mills' government pledged in a budget on Wednesday.

The 2012 budget speech to parliament sets out centre-left Mills' stall for re-election in 2012, when he is due again to face Nana Akufo-Addo, close runner-up in a 2008 poll.

Since then, Ghana has become an oil exporter and joined the ranks of the world's lower-middle-income countries, yet many Ghanaians complain they have yet to see the new-found wealth.

This indeed is a budget that heralds the march towards the 'Better Ghana' and gives hope of a brighter tomorrow, Finance Minister Kwabena Duffuor told parliament.

Spending next year will rise to 17.5 billion cedis, a gain of 12.5 percent on 2011 and slightly outpacing an increase in government revenues to 15.6 billion cedis, according to a detailed 2012 budget statement.

With real overall growth targeted at 9.4 percent next year, the 2012 budget deficit will hit 4.8 percent of gross domestic product, the same as a newly-revised estimate for the 2011 deficit given to parliament by Duffuor.

Standard Chartered analyst Razia Khan noted that, once debt service costs were taken into account, that meant Ghana would register a primary budget surplus of 2.6 percent of GDP.

For Ghana to register a surplus is really something ... (It) should go some way towards underscoring the progress that Ghana has made with fiscal policy, she added.

CHINESE HELP

Economic growth for 2011 was put at 13.6 percent, slightly lower than an earlier forecast of 14.4 percent but still one of the highest rates in the world.

Inflation, which stood at 8.56 percent in October, was seen averaging 8.7 percent next year to finish at 8.5 percent by next December.

Oil cash from the Jubilee offshore field and disbursements from a Chinese Development Bank loan will allow the West African state, which is also the world's second-largest cocoa producer, to embark on major infrastructure improvements.

Duffuor cited plans to extend electricity to over 2,200 communities nationwide, create 4,000 new water boreholes and boost road and rail provision.

The budget also allots 3.4 billion cedis to schemes aimed at tackling poverty, including improved healthcare provision, better access to water and electricity in rural areas and the launch of farming projects in poor areas.

Africa's second biggest goldminer, Ghana will increase corporate taxes on the sector to 35 percent from 25 percent and a separate 10 percent tax on windfall profits will be introduced.

The Ghanaian cedi, which has fallen some seven percent against the dollar since July as investors spooked by the euro zone crisis become wary of frontier market assets, traded broadly unchanged at 1.6100 to the U.S. currency.